Build to Rent Loans: Construction Through Rental Refinance

A build to rent loan at Ledger is two loans from one lender. The construction loan funds the lot and the build, up to 90% of cost, interest only for 9 to 18 months. When the home is complete, a 30-year rental refinance up to 80% of the appraised value pays off the construction loan. The rental loan qualifies on the home's rent, and it needs a signed lease to close.

Construction loan closesLot plus build, up to 90% LTC. 3 to 4 weeks to close.
Build with drawsUp to 2 draws a month, no minimum, 3 to 5 business days to wire.
CO, appraisal, leaseAppraised value and market rent (Form 1007). Sign a lease of 12 months or more.
Rental refinance closesPays off the construction loan. No prepayment penalty.
Cash back, next lotCash out up to 75% LTV. Repeat.

Build to Rent Loans: Quick Facts

Construction loan, leverage: Up to 90% LTC
Construction loan, term: 9 to 18 months, interest only
Construction loan, size: $150K to $5M
Prepayment penalty on construction: None
Rental refinance, leverage: Up to 80% LTV (75% cash out)
Rental refinance, term: 30-year fixed
Rental refinance, rates: From 6.75%
Minimum DSCR: 1.00x
Signed lease to close: Required, 12 to 36 months
Homes per rental loan: 1 to 20, same state
Borrower: LLC or entity, no tax returns
Where we lend: 45 states + DC

Building to hold? Get a term sheet on both loans at once.

Tell us the lot, the budget, and the market rent. We size the construction loan and the rental refinance together, so you know the cash-out before you break ground. First build? See first-time builder construction loans.

Get a Term Sheet →

Who Build to Rent Loans Are For

We lend to the builder or investor who owns the homes. The build to rent loan fits:

Builders who keep some of what they build. Sell three, hold two, refinance the two into rental loans.
Investors building 1 to 20 homes to hold. Single-family homes, townhomes, and 2 to 4 unit properties, scattered site or infill.
Spec builders who decide mid-build to hold. The construction loan has no prepayment penalty, so the exit can change.
Operators who want one lender on both sides. One file, one team, one set of numbers from the lot to the 30-year loan.

We do not place capital in build to rent funds, and we do not finance communities above 20 homes in one loan. For a larger program, we structure several loans, up to $10 million per borrower and $20 million case by case.

Loan 1: The Construction Loan

The construction loan is a ground-up construction loan, the same loan a spec builder uses. The hold exit changes how we size it, not how it works.

Leverage. Up to 90% of total cost (LTC) and up to 70% of the as-completed value (LTARV). The 90% LTC program needs a 700 FICO, a loan at or under $3 million, and 5 or more completed builds. Most experienced builders size at 85% LTC. See how LTC, LTV, and LTARV work.
Lot advance. Up to 70% of the lot value at closing when permits are in hand. Without permits at closing, the lot advance caps at 60%.
Term and rate. 9 to 18 months, fixed rate, interest only on the drawn balance. An interest reserve sized into the loan pays the monthly interest during the build.
Draws. No minimum draw, up to 2 draws a month, $350 per draw plus the inspection, 3 to 5 business days from request to wire. The draw process and a sample draw schedule are on their own pages.
Size. $150,000 to $5,000,000 per loan.
Prepayment. None. The rental refinance pays off the construction loan the day it funds, with no penalty.
Experience. 3 or more completed builds in the last 36 months, or a first-time builder construction loan that qualifies on your general contractor's record.

Say "hold" at the term sheet. When we know the exit is a rental refinance, we check the market rent and the DSCR before the construction loan closes. You learn whether the home cash flows at 75% LTV before you buy the lot, not after the CO.

Loan 2: The Rental Refinance

The rental refinance is a 30-year loan on the finished home. It pays off the construction loan and, when the numbers allow, returns cash to you. It qualifies on the home, not on your tax returns. Lenders call this a DSCR loan: DSCR is the debt service coverage ratio, the monthly rent divided by the monthly payment. Ledger's DSCR rental loan is the product behind this page.

Leverage. Up to 80% of value on a rate-and-term refinance and up to 75% with cash out, on 1 to 4 unit homes with a 680 or higher FICO and a loan at or under $1.5 million. Leverage steps down above $1.5 million.
Term and rate. 30-year fixed, with interest-only and adjustable options. Rates from 6.75%. Prepayment options run from 0 to 5 years, and a shorter prepayment period prices higher.
Minimum DSCR. 1.00x on 1 to 4 unit homes. 1.15x on 5 to 10 unit properties and cross-collateralized portfolios.
The rent we use. The lower of the rent on the signed lease and the market rent on the appraisal's Form 1007 rent schedule.
Lease. A signed lease must be in place before the rental loan closes. The lease must be fully executed with a third-party tenant, in US dollars, for an initial term of 12 to 36 months, with one lease per unit. Leases to family members, entity members, or companies are not eligible. Month-to-month, rent-to-own, and room-by-room leases are not eligible.
Condition. Complete and lease-ready, with no major work left. Deferred maintenance at or under 3% of value.
Size. $100,000 to $3,000,000, or $2,500,000 with cash out.
Credit. 680 FICO minimum, and 700 or higher is preferred.
Appraisal. A new appraisal with the Form 1007 market rent schedule. The construction appraisal does not carry over, because the rental loan is sized on the finished home.

What the Home Is Worth at the Refinance

This is the question that decides whether you take cash out or bring cash in. The rental loan is a percentage of value, and value depends on how long you have owned the property.

Under 12 months since the lot purchase: the standard rule is the lower of your documented cost basis and the appraised value. Cost basis is the lot price plus the documented construction cost.
12 to 36 months: the lower of cost basis plus market appreciation and the appraised value.
Over 36 months: the appraised value.

Our credit policy has one exception. If the project adds substantial value, Ledger can consider the appraised value above cost, regardless of seasoning. A completed ground-up build is the main example. Underwriting makes the final decision on the rental appraisal, and a large gap between value and cost gets a closer review. Tell us at the construction term sheet that you plan to hold, so we can review the value approach early. The worked example below shows both outcomes.

How Much Cash You Can Take Out

Cash out means net proceeds to you above 2% of the loan amount. Below that, the loan is a rate-and-term refinance.
Maximum leverage with cash out: 75% of value on 1 to 4 unit homes, 680 FICO or higher.
Cash-out cap: $500,000 when the loan is above 65% of value. $1,000,000 at 65% or below.
Cash-out loan above $2,000,000: exception approval.
Construction loans never include cash out. The cash comes at the rental refinance, after the home is complete.

Worked Example: One Home, Lot to Rental Loan

The numbers are illustrative. A builder buys a permitted lot for $90,000 and builds a single-family rental for $310,000, hard and soft costs included. Total cost is $400,000. The as-completed appraisal is $520,000.

The construction loan

Item	Amount
Lot	$90,000
Construction budget (hard + soft, GC fee and contingency in)	$310,000
Total project cost	$400,000
Construction loan at 85% LTC	$340,000
LTARV ($340,000 / $520,000)	65.4%
Builder equity at closing	$60,000 + closing costs
Term	12 months, interest only

The build takes 10 months. The interest reserve pays the monthly interest from the drawn balance. The CO issues in month 10, and we order the rental appraisal. It comes back at $520,000 with a Form 1007 market rent of $3,500 a month. The builder signs a 12-month lease at $3,500 a month before the rental loan closes.

The rental refinance, two outcomes

Column A uses the appraised value. Column B uses the standard under-12-month rule with no value-added credit, so value is the $400,000 cost basis. Rate 7.50%, 30-year fixed, taxes and insurance $600 a month, all illustrative.

Line	A: Appraised value	B: Cost basis
Value used	$520,000	$400,000
Loan type	Cash out, 75% LTV	Rate-and-term, 80% LTV
Rental loan amount	$390,000	$320,000
Construction loan payoff	$340,000	$340,000
Cash to (from) the builder, before closing costs	$50,000	($20,000)
Principal and interest at 7.50%	$2,727	$2,237
Taxes and insurance	$600	$600
Total monthly payment (PITIA)	$3,327	$2,837
Rent used (lower of lease and Form 1007)	$3,500	$3,500
DSCR	1.05x	1.23x

Two lessons. First, the value rule moves the result by $70,000 on a $400,000 project, which is why we review it at the construction term sheet. Second, DSCR binds before LTV on many new builds. In column A the payment at 75% LTV clears 1.00x with little room. In a market with higher taxes, the loan steps down to 70% LTV to hold 1.00x, and the cash out shrinks to about $24,000. Run your own numbers on the DSCR rental loan calculator and the construction loan calculator.

Timeline: Construction Close to Rental Close

Construction term sheet, with the hold exit noted. We check the market rent and the DSCR at 75% LTV and note the value approach in the file. The construction loan closes in 3 to 4 weeks.
Build with draws. Up to 2 draws a month, each wired 3 to 5 business days after a complete request. Months 1 to 10 in the example.
Send the rental refinance application 2 to 3 weeks before the CO. Entity documents, credit, insurance quote, and the tax figure. The file is ready when the home is.
CO issues. We order the appraisal, and you lease the home. The appraiser needs a complete, lease-ready home and prepares the Form 1007 rent schedule, in 1 to 2 weeks. List the home for rent at the CO. A signed lease must be in place before the rental loan closes.
Rental loan closes. 3 to 4 weeks from a complete file. It pays off the construction loan at par, with no prepayment penalty, and wires any cash out to you. If the lease is signed in time, most borrowers close the rental loan 4 to 6 weeks after the CO.

You pay construction interest until the rental loan funds. Size the interest reserve to cover the gap after the CO, including the time to lease the home.

Portfolio Takeout: Several Homes, One Rental Loan

When you build several homes in one market, you can refinance them one loan per home or cross them into one rental loan.

Up to 20 homes per loan, all in the same state, from $250,000.
Minimum 1.15x DSCR on the portfolio.
Release price of 125% of each home's allocated loan amount. Sell one home, pay its release price, and the rest of the loan stays in place.
One closing, one payment, one set of reserves instead of ten.
Up to $20,000,000 total exposure per borrower across loans.

Homes that finish months apart can start on individual rental loans and cross later, once the last CO issues.

Ledger vs a Bank Construction-to-Perm vs Two Lenders

Item	Ledger build to rent loan	Bank construction-to-perm	Two separate lenders
Qualifies on	The home's rent under a signed lease (DSCR) and the builder's track record	Personal income, tax returns, and DTI	Two underwrites, two sets of rules
Borrower	LLC or other entity	Often the individual	Varies by lender
Homes financed at once	1 to 20 per rental loan, up to $20M per borrower	Banks typically cap financed properties per borrower	Each lender sets its own cap
Construction leverage	Up to 90% LTC	Typically 75% to 80% LTC	Varies
Takeout leverage	Up to 80% LTV, 75% with cash out	Often lower on investment property	Varies
Draws	Up to 2 a month, no minimum, 3 to 5 business days	Typically monthly	Set by the construction lender
Prepayment on the construction loan	None	Often locked into the permanent phase	Penalty if you leave early, at many lenders
Value at takeout	Appraised value can count on a completed build, reviewed at the construction term sheet	Set once at the start	New lender, new appraisal, new rules
Time to close	3 to 4 weeks, each loan	Typically 45 to 90 days	Each lender on its own clock

Frequently Asked Questions

What is a build to rent loan?

A build to rent loan is two loans from one lender. The first is a ground-up construction loan that funds the lot and the build, up to 90% of cost, interest only for 9 to 18 months. The second is a 30-year rental refinance that pays off the construction loan when the home is complete, up to 80% of the appraised value. The rental loan qualifies on the home's rent, not the builder's personal income.

Do I need a tenant before the rental refinance closes?

Yes. The rental refinance needs a signed lease before it closes. The lease must be fully executed with a third-party tenant, for an initial term of 12 to 36 months. The loan uses the lower of the lease rent and the market rent on the appraisal's Form 1007 rent schedule. List the home for rent when the certificate of occupancy issues, so the lease is in place when the file is ready.

Does the rental refinance use the appraised value or my cost?

It depends on seasoning. Within 12 months of the lot purchase, the standard rule values the home at the lower of your documented cost basis and the appraised value. From 12 to 36 months, cost basis plus market appreciation applies. After 36 months, the appraised value applies. If the project adds substantial value, Ledger can consider the appraised value above cost, regardless of seasoning. A completed ground-up build is the main example. Underwriting makes the final decision on the rental appraisal. Tell us at the construction term sheet that you plan to hold, so we can review the value approach early.

How much cash can I take out at the rental refinance?

Cash-out rental loans go up to 75% of value on 1 to 4 unit homes with a 680 or higher FICO. Cash out is capped at $500,000 when the loan is above 65% of value and $1,000,000 at 65% or below. A cash-out loan above $2,000,000 needs exception approval.

How soon after the certificate of occupancy can I refinance?

The appraisal for the rental loan needs a complete, lease-ready home, so we order it when the certificate of occupancy issues. The appraisal takes 1 to 2 weeks, and the rental loan closes 3 to 4 weeks from a complete file. A signed lease must be in place before closing, so list the home for rent at the CO. Send the rental refinance application 2 to 3 weeks before the CO so the file is ready. If the lease is signed in that window, most build to rent borrowers close the rental loan 4 to 6 weeks after the CO.

Is there a prepayment penalty when the rental loan pays off the construction loan?

No. Ledger construction loans have no prepayment penalty. The rental loan pays off the construction loan the day it funds, at month 8 or month 18, with no extra cost. The rental loan has its own prepayment option, from 0 to 5 years, and a shorter prepayment period prices at a higher rate.

Can I refinance a home I built with another lender?

Yes. The rental refinance is open to any investor with a complete, leased rental home, whoever financed the build. The same value, rent, DSCR, and cash-out rules apply.

I built with cash. Can I take cash out?

Yes. If you bought the lot free and clear within the last 6 months, the loan is treated as a delayed purchase and is capped at 120% of your documented cost basis, with a settlement statement to confirm there was no prior mortgage. After 6 months, the standard refinance rules apply.

Can I put several homes in one rental loan?

Yes. One cross-collateralized rental loan can hold up to 20 homes in the same state, from $250,000, at a minimum 1.15x DSCR. Each home carries a release price of 125% of its allocated loan amount, so you can sell one home and release it without refinancing the rest. One loan per home is also available.

What experience do I need for a build to rent loan?

The construction loan needs 3 or more completed builds in the last 36 months, or a first-time builder loan that qualifies on your general contractor's track record. The rental refinance has no experience requirement. It qualifies on the home's rent and your credit.

What DSCR do I need for the rental refinance?

A minimum 1.00x on 1 to 4 unit homes and 1.15x on 5 to 10 unit properties and cross-collateralized portfolios. DSCR is the monthly rent divided by the monthly principal, interest, taxes, insurance, and association dues. A $3,500 rent against a $3,327 payment is a 1.05x DSCR. The What Is DSCR page has the full math.

Is there a DSCR construction loan?

Ledger does it with two loans. A construction loan sizes on cost and the as-completed value, because the home has no rent until it is complete. When the home is complete and leased, a DSCR rental refinance pays off the construction loan. We check the market rent and the DSCR at the construction term sheet, so you know the rental loan works before you buy the lot.

What property types qualify for a build to rent loan?

Single-family homes, 2 to 4 unit properties, and townhomes, stick-built on a permanent foundation. 5 to 10 unit properties are case by case at a 1.15x DSCR. Condominiums, modular and manufactured homes, mixed-use buildings, and short-term rentals are not eligible. Ledger lends in 45 states and Washington, D.C. See where we lend.

Know your cash-out before you buy the lot.

Send the lot price, the budget, and the market rent. We return a term sheet that sizes the construction loan and the rental refinance together.

Estimate the Rental Rate Get a Term Sheet

Build to Rent Loans